VLADIVOSTOK, Russia, Sept 6 (Reuters) - Russia's No. 2 bank VTB returned to profit in July after record losses in the first six months of the year, and will start lending in the Chinese yuan and other non-Western currencies later this year, it said on Tuesday.

Hit by unprecedented economic sanctions from the West, Russia's banking sector posted heavy losses in the first six months of the year and officials have pushed lenders to drastically reduce their exposure to the U.S. dollar and euro.

Speaking at Russia's Eastern Economic Forum in Vladivostok, VTB CEO Andrei Kostin said VTB still expected to post a loss for the full year, despite the turnaround over the summer.

"Since July, our work has started turning a profit. We hope that the third and fourth quarters as a whole will be positive," Kostin said at the forum.

But the bank suffered "significant losses" in the first half, said Kostin, due to a combination of assets frozen abroad, sanctions and open foreign exchange positions.

Kostin said the bank had seen big shifts in currency dynamics among its clients so far this year, with the share of deposits in "unfriendly" currencies sliding to 15% from 40% at the start of the year. Russia has labelled all countries that have hit it with sanctions - including the United States, European Union members and Britain - "unfriendly" and pushed banks and companies to stop dealing in their currencies.

VTB plans to start issuing corporate loans to "friendly" countries before the end of 2022, Kostin said, with one potential project concerning the equivalent of 450 billion roubles ($7.4 billion) in Chinese yuan. He did not give further details.

VTB's move into the Chinese currency follows Russia's top lender Sberbank, which said on Tuesday it had already started lending in yuan and had seen "quite large demand."

($1 = 60.82 roubles) (Reporting by Alex Marrow Writing by Jake Cordell Editing by Jason Neely and Mark Potter)